Navigating the future financial landscape of your golden years can seem daunting. That’s where a retirement calculator comes in handy.
If you need some more guidance on how to use this calculator, scroll further below for a quick guide and additional insights. We will walk you through its functionality, demonstrate how it helps project your retirement savings, and illustrate the impact of various factors on your retirement nest egg.
Please hit Calculate to proceed.
Here’s a quick guide to using the calculator and what each input needs.
There are two tabs – Simple and Advanced. As the names suggest, you get a simplified or the full monty version of the calculator.
Let’s go through the inputs for the Simple mode:
- Currency: Simply choose the currency you intend to save and withdraw in (e.g., USD, GBP, CAD, AUD, EUR, or INR).
- Current Age: Nice and simple – how old are you right now (in years)?
- Retirement Age: The age at which you wish to begin your retirement.
- Current Portfolio Value: Do you already have a portfolio for investments, stocks, shares, or bonds? Be sure to enter your savings amounts here – and only include those amounts you can freely use to invest with.
- Annual Contribution: How much do you save or contribute each year? This must be a figure you know you’ll invest without fail. It’s assumed that these payments are made each year until you retire.
- Annual Return (%): How much do you roughly expect to make from your portfolio each year? I’d recommend entering 6 to 8% if you’re unsure.
- Annual Expense: The amount of money you expect to require in your retirement.
Note that the Simple mode uses a default inflation rate of 2%. Income taxes are ignored (i.e. assumed to be 0%). If you’d like to account for those, please used the Advanced mode.
The Advanced tab features more inputs and more functionality. Here are the key things to know about the inputs on this tab:
- Annual Contribution and Stop Contribution Age: These two inputs work in conjunction here. You can enter a specific age up to which you wish to continue contributing to your portfolio. See the discussion below for more clarification.
- Initial Return (%): This is the return on your portfolio during your wealth build-up phase. Typically people prefer a more aggressive allocation, you could try a higher number like 8% here.
- Retirement Return (%): Once in retirement, people generally skew to a more conservative portfolio, so you can model that using a lower return figure – say 6%.
- Inflation Rate (%): Enter in your country’s current inflation rate if you know it. If inflation is changing regularly where you live, try to set an average or median amount. A good figure for a developed country may be, for example, 2%.
- Stop Contribution Age: At what age do you want to stop paying into your savings or portfolio? This value can be any year between your Current Age and your Retirement Age.
- Annual Expense (Post-tax): In today’s currency terms, how much money will you need in your retirement phase? Don’t worry about inflation – the calculator will take care of this for you! Simply enter in a number based on current inflation rates and your results will be adjusted. Also remember you will very likely have to pay income taxes in your retirement as well, so your withdrawals from the portfolio will actually be higher to account for income taxes.
- Supporting Income (Pre-tax): Do you expect to receive any supporting money from a pension plan, social security, or a side-hustle? Enter the gross amount here.
- Expected Average Income Tax Rate (%): If you know how much you expect to pay in average income tax on your income streams, enter in a number. If you don’t know a number, a low-figure, usually between 10% to 20% will serve as a reasonable placeholder.
More about ‘Stop Contribution Age’
The Stop Contribution Age field allows you to choose a ‘stopping point’ between your current age and retirement age in case you wish to stop saving before you officially retire.
The idea here is that if you have built up a reasonable chunk of savings early in your life, compounding that amount over a decade or more can build it up to a big value by the time retirement comes around.
For example, if you’re 40 now and are set to retire at 65, but want to save until the age of 50, you would set the following in the calculator:
- Current Age: 40
- Stop Contribution Age: 50
- Retirement Age: 65
- Annual Contribution: $20,000
In this case, the calculator will build in a contribution of $20,000 each year (adjusted upwards for inflation for each passing year) until the age of 50. After 50, your portfolio just compounds on its own without any further contributions.
From the age of 51 to 65, you’re free to retain those additional inflation-adjusted $20,000 for your own personal use and enjoyment!
You can also play around with younger Stop Contribution Ages if you want to save over a short period, or you can also set it one year before retirement if you intend to keep saving up to the end. It’s your choice!
A great feature of this retirement calculator is the four different ways you can export and use your data. Why not choose one of the following?
- Descriptive: This text output simply provides you with a written summary of your retirement numbers. It’ll give you a brief overview of what you can achieve and expect from the numbers you enter into the calculator.
- Chart 1 – Portfolio Value & Annual Investment Income: This chart shows your portfolio value and annual investment income. The left y-axis and black line show you how you can expect your portfolio value to dip and rise over time. The vertical bars, meanwhile, show you how much annual investment income you can expect on the back of your portfolio. This data takes into account dividends and capital gains, or share price increases.
- Chart 2 – Annual Cash Flows & Returns: This chart, meanwhile, tells you what you can expect from annual cash flows and returns. This means you can see how much cash you’ll add to your portfolio, and how much you’ll withdraw, over the years ahead (check the orange bars). The blue bars, meanwhile, tell you how much money you’ll make in annual investment income.
- Table: Nice and simple – a table will appear, breaking down your calculations for each year.
- Do also make sure to click or tap ‘Share’ if you want to send results externally. Don’t forget to bookmark this calculator page if you want to adjust your data in future, too!
There’s a convenient button to Share your results too. You can save the link and come back to the calculator to reuse the inputs that you previously entered as well.
How much money do I really need to retire?
Saving for retirement is something that crosses most of our minds. But where on Earth do you start? That all depends on a few niche factors, such as the age at which you’d like to retire, how much you intend to spend during retirement, and where you live. There’s also a plethora of advice out there that provides different answers – it can get quite confusing!
So, a viable rule of thumb is to start saving around 10% of your annual income as early as possible. However, do keep in close mind that your cost of living expenses will likely change over the years to come.
Your living situation may change, you may switch careers, and you may have dependents to look after. Your life may look drastically different at 31 compared to how it looks at 21!
Some experts suggest trying to save based on your desired lifestyle. For example, a minimum savings model will allow you to enjoy your money now and make room for everyday expenses. Of course, everyone’s circumstances will vary, so please use the free retirement calculator as a quick way to plan ahead.
However, if you intend to kick back and relax in luxury, you’re likely going to need to start saving more money, more often, and as soon as possible.
Is investing better than saving for retirement?
That really depends on where and how you save your money, but on paper, investing stands to help you grow your savings beyond your basic contributions.
Of course, the potential amount you can grow through investing will depend entirely on your choice(s) of stocks and shares, and how often you choose to build your portfolio. As with FIRE savings, there’s also risks involved.
Keep in mind that investing is volatile – especially if you’re considering cryptocurrencies and digital assets – and that you’ll need to keep a careful eye on your portfolio if you intend to make the most of it.
Why should I save for retirement?
Saving for retirement arguably provides a great reward at the apex of a long working life. It’s a cushion to help you relax and explore the world without fretting about an income.
That said, many people choose to retire early or to use their money in the here and now – as life is, tragically, very short!
Your own retirement savings decisions are your own. Do remember that the guide and calculator provided here should only ever be used as encouragement!
by Brianna Johnson
Brianna Johnson, a Miami-based finance veteran, is a wealth advisor for high net-worth families. She loves to write and to share her knowledge. For PFF, she writes in-depth articles on finance and investments that help readers get unique insights. See more.